Common Stock

Common Stock ## What is Common Stock? Common stock is ownership in a company. When you buy a share of Apple or Tesla, you become a part-owner — a shareholder. The company splits its ownership into millions (or billions) of equal pieces called shares, and each share represents a proportional claim on the company's assets and earnings. Real-world example: If a company has 1,000,000 shares outstanding and you own 10,000 of them, you own exactly 1% of the company. If the company is worth $50 million, your stake is worth $500,000. --- ## What Rights Do Common Stockholders Have? Owning stock isn't just about price going up. It comes with legal rights: 1. Voting Rights Common shareholders vote on major decisions: electing the board of directors, approving mergers, and ratifying major corporate actions. Most companies give one vote per share — so the more shares you own, the more influence you have. > Example: If you own 1,000 shares and there are 5 board seats up for election, you have 1,000 votes to allocate. Under statutory voting, you get 1,000 votes per seat. Under cumulative voting, you get 5,000 total votes and can concentrate them on one candidate — a protection for minority shareholders. 2. Dividend Rights Common shareholders may receive dividends — cash payments from company profits. But here's the critical order: preferred stockholders get paid first, then common stockholders. If a company is struggling and only has enough to pay preferred dividends, common shareholders get nothing. 3. Preemptive Rights When a company issues new shares, existing shareholders have the right of first refusal to buy new shares proportionally, so their ownership percentage doesn't get diluted. This is…